Electric vehicle startups are approaching a make-or-break moment. As legacy automakers increasingly ramp production of all-electric vehicles, cushioned by the profits of gas-powered models, a handful of EV startups are scrambling to conserve cash and stay in the mix. The last few years saw a wave of EV startups hit the public markets, all hoping to catch some of the lightning that had made Tesla ‘s stock surge. Many did see soaring share prices, for a while, but times have changed due to higher interest rates and growing investor skepticism. Now, for the aspiring EV giants that went public to so much fanfare, the game is a grim one: Can these companies reach profitability before running out of cash? Here’s where things stand after the first quarter for six of the most prominent names. Rivian Rivian is still by far the best-positioned of the group, having raised nearly $12 billion via a perfectly timed IPO in 2021 and more since. The $11.8 billion it had remaining as of the end of March should be enough to fund the company through 2025, Chief Financial Officer Claire McDonough said during Rivian’s first-quarter earnings presentation on May 9. Rivian’s spending plans are still ambitious. The EV maker is putting a lot of money and effort behind its upcoming R2 vehicle platform, which will underpin a series of new models priced well below the R1T pickup, which currently starts at $73,000. The company is planning a new high-volume factory in Georgia to build the R2 models but has pushed off the R2’s planned debut by a year, from 2025 to 2026, to help stretch its cash. Rivian is taking other steps to ensure its cash lasts as long as possible. It cut about 900 employees in February, or about 6% of its workforce. It’s also working to take cost out of its current vehicles, with new Enduro electric motors made in-house as well as lower-cost lithium iron phosphate battery packs for the delivery vans it makes for Amazon and soon for new lower-cost versions of the R1T and related R1S SUV. The cuts are already bearing fruit. McDonough said Rivian’s gross loss per delivered vehicle was “nearly cut in half” in the first quarter versus the fourth quarter of last year. The company also expects pricing gains. Rivian will soon finish delivering orders placed before March 1, 2022, when it raised prices on both the R1S and R1T about $12,000. These steps could help the company reach its goal of reporting positive gross profit sometime in 2024, McDonough said. If it succeeds, that will likely be a strongly positive catalyst for the stock. Rivian’s gross profit, which is what it earns after factoring out manufacturing and selling costs, was negative $535 million in the first quarter. Analysts’ reactions to Rivian’s first-quarter report were generally upbeat. “We believe the improvements seen so far provide encouraging evidence that the company is progressing towards its positive gross margin target in 2024,” Deutsche Bank’s Emmanuel Rosner wrote on May 10, noting the company geared up to incorporate the Enduro motors and new battery packs more quickly than anticipated. Rosner has a buy rating on Rivian’s stock, with a price target of $20. The stock closed Tuesday at $14.20. Lucid Lucid isn’t in immediate danger of running out of cash, but analysts are growing concerned. The company still had $3.4 billion in cash and an additional $700 million in available credit lines as of March 31, but it lost almost $780 million in the first quarter alone. CFO Sherry House said during Lucid’s May 8 earnings call its cash should be enough to fund operations at least until the second quarter of 2024. But what happens then? It’s a question without an easy answer, given the challenges of raising cash in the current environment. Lucid cut 18% of its staff in March, about 1,300 workers, and like Rivian, it’s working to take cost out of its vehicles to improve its gross profit margins in the near term. The company is also trying to restructure some of its freight contracts and drawing down its bloated inventories of parts and raw materials. But the biggest challenge may be demand. Lucid’s Air sedan has received glowing reviews for its style, performance and range, but it’s not selling as well as the company expected . CEO Peter Rawlinson has said Lucid will ramp up advertising in a bid to make more potential buyers aware of the Air, but the pool of buyers willing to spend six figures on a luxury EV from a new company in the current economic environment may be limited. A second Lucid, a big electric luxury SUV called Gravity, is expected sometime next year. Bank of America’s John Murphy summed up the pros and cons in a May 9 note: “We view LCID as one of the most attractive among the universe of start-up EV automakers because it has class leading powertrain tech along with other key pieces of the puzzle.” “That said, we expect it could take until 2027+ for LCID to breakeven on an operating and cash flow basis (prior 2026) and project it will need to raise more than $10bn in capital,” Murphy added. Murphy has a neutral rating on Lucid’s stock, with a price target of $8. The stock closed Tuesday at $7.55. Fisker Former BMW and Aston Martin designer Henrik Fisker, aiming to take a different path to building EVs, founded Fisker in 2016. Unlike Rivian and Lucid, Fisker doesn’t have a factory and it isn’t planning to build one. Instead, it’s using contract manufacturers to build its vehicles. Global auto-industry supplier Magna International is producing Fisker’s first model, the Ocean SUV. Taiwan’s Foxconn will build its second model, a…
Read More: EV startups conserve cash, fight to stay alive
2023-05-24 17:13:24